Favorite Schools

Favorite Teams

Paul Volcker, former Fed chair, tells Princeton University students to 'think smaller'

Paul Volcker.JPG

Paul Volcker, former Chairman of the Federal Reserve Bank and Co-Chair of the State Budget Crisis Task Force, speaks during a panel discussion on the release of a report by the task force on the New Jersey state budget and debt at the Trenton Marriott. Trenton, NJ 12/13/12.
(Tony Kurdzuk/The Star-Ledger)

PRINCETON — A two-time chairman of the Federal Reserve, economic advisor to President Barack Obama and former chairman of the Economic Recovery Advisory Board, Paul Volcker is no stranger to big accomplishments, but the advice he gave the students at his alma mater yesterday was “think smaller.”

The octogenarian spoke at Princeton University yesterday on the current state of the government — and the public’s increasing lack of faith in it as a force for good — telling the audience that while plenty of people are asking “What can we do?” about the many problems facing the country, more focus is needed on questions like “How do we get something done?” and “How do we implement the big ideas?”

But he repeatedly stressed its importance in pulling off big, visionary projects, calling it “the real work” that was needed to get things done. It was a lack of public administration, Volcker said, that led to the troubled implementation of the Affordable Care Act, the lagging response to Hurricane Katrina and the 2008 financial crisis.

“Skepticism of the government should be part of the American experience, but what was healthy skepticism seemed to settle to cynicism and a corrosive mistrust,” he said. “It’s important to have some agencies that people respect and do have confidence in.”

In an attempt to help eradicate that problem, Volcker created the Volcker Alliance last year, a nonpartisan, nonprofit group he spearheads which is aimed at rethinking public policies on all government levels, including internationally.

In the aftermath of the Great Recession, he also penned the “Volcker Rule” to try to restore the public’s faith in the banking system, he said. Due to take effect in April this year, the rule prohibits proprietary speculative trading activity by banks or bank-owned institutions meant for their own gain rather than the good of the consumer.

“It was meant to change the banking atmosphere back to public service,” he said. “It’s not just that these operations are risky and can produce big losses. It creates a culture in the bank that this is a free-for-all. They concentrate on making money and the consumer comes second. It’s a culture that has permeated the banking system.”

Still, Volcker said, many public administration questions had yet to be answered, such as how to create a better regulatory structure of the financial system and when it’s appropriate for governments to contract with private businesses to help accomplish government functions and the type of government oversight that should be used in those relationships.

“We’ve got more problems than I’ve got answers,” he said, drawing laughter from the crowd.

It’s now up to the students in the room, he said, to figure out how to solve them.

“Teaching the importance of public administration will depend heavily on our leading educational institutions,” he said. “Problems with the government have seldom been more pressing. The school motto ‘Princeton in the nation’s service’ could not be more relevant than today.”